Nickel market in flux as LME price rallies

Spanish Market: Metals
21/03/24

The benchmark nickel price on the London Metal Exchange (LME) has rallied over the past month after briefly falling below $16,000/t, as trading firms increased their buying to cover vast short positions. Options buying activity and commodity trading advisor bids have lifted the contract above $18,000/t in recent days.

Higher Chinese nickel sulphate prices, delays to the issue of ore production licences in Indonesia and cuts to class 2 nickel supply also supported the price rise.

But the physical market outlook is mixed, despite the recent rise in prices. A sizable surplus of class 1 nickel and weak downstream consumption are applying pressure on the downside, but possible further supply cuts in Indonesia, Australia and New Caledonia are shoring up prices. A price gap between LME and Shanghai Futures Exchange (SHFE) contracts is providing arbitrage opportunities and keeping LME values in check.

Covering short positions

The LME official three-month nickel price rose by 13.5pc from $15,987.50/t on 9 February to $18,445/t on 13 March. Sustained buying to cover short positions was a major driver of the increase. Nickel short positions on the LME fell from 61,000 lots on 9 February to 22,000 lots on 11 March, according to financial broker Marex strategist Al Munro. The cyclical nature of nickel trade has also prompted options positioning around the current prices as trading companies guard against volatility.

Nickel prices hit a trough in February, a trading firm said. "The class 2 market is tighter than expected now, so we should not go back to the $16,000/t level."

Class 1 oversupplied, class 2 tight

Fundamentals for physical nickel indicate there is a surplus for class 1 nickel, driven by increasing LME-deliverable capacity in China and declining use of class 1 products in the battery market. On-warrant class 1 stocks in LME warehouses touched 70,000t on 4 March, for the first time since November 2021.

In contrast, availability of class 2 nickel has tightened, with nearly 200,000t of capacity in the form of ferro-nickel and nickel pig iron (NPI) cut from the supply mix in recent months, according to Australian bank Macquarie.

The supply squeeze is most pronounced in ferro-nickel. The low-grade product held a narrow price gap with NPI last year, but is now being offered at just $1,000/t below class 1 LME prices, according to Macquarie. Surplus Asian NPI stocks are flowing into Europe to replace scarce ferro-nickel supplies, Macquarie said.

Unreliable and under-reported data from China and Indonesia have made it difficult for market participants to assess nickel balances against price movements, particularly in class 2 products. Analysts in January predicted an overall nickel surplus of more than 100,000t for 2024, but have now cut their overhang forecasts by more than half, with a possible total rebalancing in 2025.

Battery demand jumps, stainless stable

Nickel demand growth was almost exclusively delivered by Chinese stainless steel production last year, with Macquarie pegging China's nickel use in the stainless steel sector to have risen by 20pc year on year. Chinese demand growth is expected to stabilise in 2024, as indicated by a fall in stainless futures prices on the SHFE. Macquarie expects global stainless steel production to rise by 5.5pc this year to 62.2mn t, a rate comparable with 2023.

The main source of nickel demand this year will come from restocking among battery cathode producers, reflected in rising Chinese nickel sulphate prices. The Argus assessment for nickel sulphate min 22pc ex-works China has increased by 17.5pc from the start of this year to an average of 29,650 yuan/t ($4,100/t) on 14 March. Nickel demand for electric vehicle (EV) production will rise by a third on the year to 450,000t in 2024, Argus Consulting data show.

Indonesia ore dynamics

Bureaucratic delays in granting nickel ore production licences in Indonesian have lifted ore prices, limiting the supply of downstream nickel intermediate products mixed hydroxide precipitate and matte. Indonesia's government is likely to implement stricter controls this year to guard against environmental, social and governance concerns, alleged corruption and illegal exports. This could support ore prices and drive NPI and LME nickel prices higher. But Indonesia's fundamental policy of flooding the global market with nickel units will continue.

Push-pull effect

Prices are expected to recouple with fundamentals once the current short covering programme eases. The expected nickel surplus should suppress prices below $20,000/t, market participants said. And further cuts to ex-Indonesia supply could drive the market towards $19,000/t, with trading firms focused on Australian mining group BHP's review of its Nickel West operations.

"We are in a place where everything could change in a matter of 24 hours," a trading firm said. "If Nickel West announce cuts, you will see the market reacting immediately."

By Raghav Jain

LME Nickel 3M Official $/t

Nickel Sulphate min 22pc ex-works China CNY/mt

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17/11/25

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Rio Tinto supports Australian low-CO2 iron plant

17/11/25

Rio Tinto supports Australian low-CO2 iron plant

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Chile turning right in presidential elections

17/11/25

Chile turning right in presidential elections

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Sigma paused mine in 3Q, will sell Li tailings

14/11/25

Sigma paused mine in 3Q, will sell Li tailings

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EU states to vote on TRQ, variable duty alloy safeguard

14/11/25

EU states to vote on TRQ, variable duty alloy safeguard

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The commission analysed imports relative to production and consumption of ferro-alloys, but it is not clear whether this analysis was done for silicon. Absolute import volumes have not increased, but EU silicon production and consumption have decreased sharply in recent years due to lower demand from aluminium alloy and silicone producers. And EU producers are not able to compete against lower-priced imports from third countries. All EU silicon metal production is currently off line due to untenable market conditions, with shutdowns executed in France, Spain, Germany and Bosnia-Herzegovina. Silicon metal may be affected indirectly if steel mills substitute silicon metal for ferro-silicon, although this is dependent on adjustment of production processes and ferro-silicon prices. Major producer Ferroglobe expressed concern that silicon was excluded from these measures, but welcomed "the commission's commitment to address this in a second step in the coming months". The EU has not publicly communicated any additional trade defence investigations for silicon metal. By Maeve Flaherty and Samuel Wood Price thresholds for tariff increase €/t Product type HS / CN codes Price threshold Ferro-manganese 7202 11, 7202 19 1,316 Ferro-silicon 7202 21, 7202 29 2,408 Ferro-silico-manganese 7202 30 1,392 Ferro-silico-magnesium 7202 99 30 3,647 — WTO, European Commission Volumes of tariff–rate quotas - Year 1 Product type HS and CN codes Allocation by country (where applicable) Year 1 From 18.11.2025 to 17.2.2026 From 18.2.2026 to 17.5.2026 From 18.5.2026 to 17.8.2026 From 18.8.2026 to 17.11.2026 Volume of tariff quota (net tonnes) Ferro-Manganese 7202 11. 7202 19 Norway 28,972.70 28,027.93 28,972.70 28,972.70 India 17,625.79 17,051.04 17,625.79 17,625.79 South Africa 8,272.87 8,003.10 8,272.87 8,272.87 Malaysia 6,765.92 6,545.29 6,765.92 6,765.92 South Korea 4,832.82 4,675.23 4,832.82 4,832.82 Other countries 5,557.54 5,376.31 5,557.54 5,557.54 Ferro-Silicon 7202 21. 7202 29 Norway 35,136.16 33,990.41 35,136.16 35,136.16 Iceland 13,373.32 12,937.24 13,373.32 13,373.32 Kazakhstan 8,090.25 7,826.44 8,090.25 8,090.25 Brazil 6,316.02 6,110.06 6,316.02 6,316.02 Other countries 24,984.27 24,169.56 24,984.27 24,984.27 Ferro-Silico-Magnesium 7202 99 30 China 468.90 453.61 468.90 468.90 Brazil 99.81 96.55 99.81 99.81 India 78.90 76.33 78.90 78.90 Thailand 76.83 74.32 76.83 76.83 Other countries 18.89 18.28 18.89 18.89 Ferro-Silico-Manganese 7202 30 Norway 37,067.71 35,858.98 37,067.71 37,067.71 India 31,958.61 30,916.48 31,958.61 31,958.61 Zambia 7,882.49 7,625.45 7,882.49 7,882.49 Other countries 18,955.56 18,337.44 18,955.56 18,955.56 - WTO, European Commission Volumes of tariff–rate quotas - Year 2 Product type HS and CN codes Allocation by country (where applicable) Year 2 From 18.11.2026 to 17.2.2027 From 18.11.2026 to 17.2.2027 From 18.11.2026 to 17.2.2027 From 18.11.2026 to 17.2.2027 Volume of tariff quota (net tonnes) Ferro-Manganese 7202 11. 7202 19 Norway 29,001.67 28,055.96 29,001.67 29,001.67 India 17,643.42 17,068.09 17,643.42 17,643.42 South Africa 8,281.14 8,011.10 8,281.14 8,281.14 Malaysia 6,772.68 6,551.83 6,772.68 6,772.68 South Korea 4,837.65 4,679.90 4,837.65 4,837.65 Other countries 5,563.09 5,381.69 5,563.09 5,563.09 Ferro-Silicon 7202 21. 7202 29 Norway 35,171.30 34,024.41 35,171.30 35,171.30 Iceland 13,386.70 12,950.18 13,386.70 13,386.70 Kazakhstan 8,098.34 7,834.27 8,098.34 8,098.34 Brazil 6,322.34 6,116.17 6,322.34 6,322.34 Other countries 25,009.25 24,193.73 25,009.25 25,009.25 Ferro-Silico-Magnesium 7202 99 30 China 469.37 454.07 469.37 469.37 Brazil 99.91 96.65 99.91 99.91 India 78.98 76.40 78.98 78.98 Thailand 76.91 74.40 76.91 76.91 Other countries 18.91 18.30 18.91 18.91 Ferro-Silico-Manganese 7202 30 Norway 37,104.78 35,894.84 37,104.78 37,104.78 India 31,990.57 30,947.40 31,990.57 31,990.57 Zambia 7,890.37 7,633.08 7,890.37 7,890.37 Other countries 18,974.51 18,355.78 18,974.51 18,974.51 — WTO, European Commission Volumes of tariff–rate quotas - Year 3 Product type HS and CN codes Allocation by country (where applicable) Year 3 From 18.11.2027 to 17.2.2028 From 18.11.2027 to 17.2.2028 From 18.11.2027 to 17.2.2028 From 18.11.2027 to 17.2.2028 Volume of tariff quota (net tonnes) Ferro-Manganese 7202 11. 7202 19 Norway 28,951.35 28,321.98 28,951.35 28,951.35 India 17,612.81 17,229.92 17,612.81 17,612.81 South Africa 8,266.77 8,087.06 8,266.77 8,266.77 Malaysia 6,760.93 6,613.95 6,760.93 6,760.93 Korea. Republic of 4,829.26 4,724.28 4,829.26 4,829.26 Other countries 5,553.44 5,432.71 5,553.44 5,553.44 Ferro-Silicon 7202 21. 7202 29 Norway 35,110.27 34,347.01 35,110.27 35,110.27 Iceland 13,363.47 13,072.96 13,363.47 13,363.47 Kazakhstan 8,084.29 7,908.55 8,084.29 8,084.29 Brazil 6,311.37 6,174.16 6,311.37 6,311.37 Other countries 24,965.86 24,423.13 24,965.86 24,965.86 Ferro-Silico-Magnesium 7202 99 30 China 468.56 458.37 468.56 468.56 Brazil 99.73 97.56 99.73 99.73 India 78.84 77.13 78.84 78.84 Thailand 76.77 75.10 76.77 76.77 Other countries 18.88 18.47 18.88 18.88 Ferro-Silico-Manganese 7202 30 Norway 37,040.40 36,235.18 37,040.40 37,040.40 India 31,935.07 31,240.83 31,935.07 31,935.07 Zambia 7,876.68 7,705.45 7,876.68 7,876.68 Other countries 18,941.59 18,529.82 18,941.59 18,941.59 — WTO, European Commission Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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